Expenses incurred by employees are generally the responsibility of the employer.

Quite often, however, employees have to bear the cost themselves when travelling for work, having meals and even providing clothes, which in most cases are not tax deductible.

What employment expenses qualify for tax relief in the UK?

Work-related travel

Having to travel to a different location from the workplace is an essential travel expense. The commute to and from the location will be tax-deductible.

Clothing

This could be for any ‘specialist’ or protective work clothes which are not paid for by the employer – these are known as flat rate expenses.

You cannot usually claim for buying tools and specialist clothing, but you can claim for their upkeep, for example, repairing, cleaning or replacing them.

You may be able to claim a standard £60 allowance per year for the cost of upkeep and replacement of specialist or protective clothing. The tax reduction you get is usually 20 per cent of the allowance.

Subsistence costs

Accommodation and upkeep are tax-deductible when an employee is away from home on work trips.

Professional subscriptions

Professional organizations’ subscriptions may also qualify for tax relief. However, the subscription should be related to your job and be made to a professional association authorized by HMRC.

Working from home

Working from home became commonplace during the pandemic.

Employers can make tax and NIC-free payments to an employee in respect of reasonable additional costs incurred for working at home, for example, gas, electricity, telephone and internet.

However, HMRC allows a tax and NIC-free flat rate reimbursement of up to £6 a week without providing evidence of extra costs. Anything above that will require receipts or bills as evidence.

The tax relief works by taking off the amount from your employment income, reducing the taxable income and the tax you have to pay.

This has led to coining the phrase ‘tax deductible’ or ‘allowable’ expenses. You may have to claim to obtain this tax relief.

Link: What if I incur expenses in relation to my job?

New measures have been introduced for the even-handed treatment of spouses and civil partners who are in the process of separation, divorce or dissolution.

The new legislation clarifies Capital Gains Tax (CGT) rules that apply to transfers of assets between spouses and civil partners, giving them up to three years in which to make no-gain or no-loss transfers of assets between themselves when they cease to live together, and unlimited time if the assets are the subject of a formal divorce agreement.

The new measure gives those who are separating more time to transfer assets between themselves without incurring a CGT charge.

The legislation also ensures that a partner who retains an interest in the former matrimonial home be given an option to claim Private Residence Relief (PRR) when it is sold.

These changes apply to disposals that occur on or after 6 April 2023.

Link: Capital Gains Tax: separation and divorce

HM Revenue & Customs (HMRC) has increased the interest rate applied to late tax payments following the latest hike in the Bank of England base rate.

The late payment interest rate increased to 4.25 per cent from 23 August – the highest rate since the height of the financial crisis in January 2009.

It will put further pressure on those struggling to pay their tax bills in the face of the cost-of-living crisis.

Late payment interest is payable on late tax bills, including:

• Income Tax
• National Insurance contributions
• Capital Gains Tax
• Stamp Duty Land Tax

The Corporation Tax pay and file rate also increased to 4.25 per cent.

What is HMRC repayment interest?

If your company or organisation pays too much Corporation Tax, HMRC will repay what you have overpaid and may also pay you interest on it.

The repayment interest rate has increased for the first time since 29 September 2009 to 0.75 per cent, up from 0.5 per cent.

Interest rates set in legislation

HMRC interest rates are set in legislation and are linked to the Bank of England base rate, so the rise is automatically triggered.

The Bank of England voted in favour of the 0.5 percentage point increase early in August.

Link: HMRC interest rates for late and early payments

Ask anyone who either uses their vehicle for business reasons, or puts fuel in a company car, and you will soon realise business mileage can be a confusing topic.

It’s important to know that if you fall into either of these two categories, you might be able to claim tax relief for business mileage.

HM Revenue & Customs’ (HMRC) business mileage rates have stayed the same for the past 12 years, and currently stand at:

• 45p for the first 10,000 miles
• 25p for each business mile above the 10,000-mile threshold.

What’s more, being clear on what HMRC defines as business mileage will save you time when you claim back what you are entitled to.

HMRC currently defines business mileage as any travel that you do whilst doing your job. This can also be extended to cover travel made to a temporary workplace.

There are, however, certain caveats to this definition where relief isn’t available. These include:

• Normal travel between your home and permanent place of work
• Any travelling you conduct privately.

Even though the business mileage rates outlined above are HMRC’s standard, employers do not need to use these rates when paying business mileage and they could choose to set their own rates.

There is a provision for employees to claim the difference at the end of each tax year where a company mileage rate is lower than HMRC’s. However, if your employer pays a higher rate of mileage than the HMRC standard, this will be subject to tax.

You must keep accurate records of all the mileage, dates, and details of your business travel, as you will need this information if you want to claim Mileage Allowance Relief.

HM Revenue & Customs (HMRC) has announced plans to offer a recurring direct debit to employers as part of their wider payment modernisation programme.

At present, employers can only set up a direct debit to collect a single payment.

The launch of this service, slated for mid-September this year, will see a change to the employer’s liabilities and business tax account (BTA) screens.

A link will also be included that will enable client companies to mandate a direct debit instruction, which will authorise the tax authority to collect money directly from their bank account.

Much like any other direct debit mandate, employers will be able to view, amend, or cancel the direct debit via a “manage your direct debit” once it has been set up.

Along with this update, HMRC stated that it has been extending employer PAYE for agent online services to allow accountants and adviser to see payment records held by HMRC along with employer liabilities.

Link: Employer PAYE — new recurring Direct Debit functionality